Consider the Simplest Macro Model with Demand-Determined Output,where AE =

question 128

Multiple Choice

Consider the simplest macro model with demand-determined output,where AE = C + I.Suppose that actual national income is $900 billion and desired consumption plus desired investment is $890 billion.We can expect that

• A)firms will see a decrease in inventories,and they will respond by increasing output,thereby increasing actual national income.
• B)firms will decrease autonomous investment by $10 billion until equilibrium national income is reached at $890 billion.
• C)firms will increase autonomous investment by $10 billion until equilibrium national income is reached at $900 billion.
• D)actual national income will increase until equilibrium national income is reached at $900 billion.
• E)firms will see an increase in inventories,and they will respond by decreasing output,thereby decreasing actual national income.

---

Definitions:

Modular Production

A manufacturing technique that involves assembling complex products from interchangeable modules or components.

Modified T-account

A modified T-account is a version of the traditional T-account used in accounting, adapted to include adjustments or additional information for clearer financial analysis.

T-account Close

A closing technique in sales where pros and cons are weighed against each other, similar to entries in a T-account, to assist in decision-making.

Continuous-agreement

An ongoing contract that renews automatically until explicitly terminated by one party.